On the State and Local Budget Crisis

By Michael Hudson The State and Local Budget Crisis The cost of the 2011 cutbacks in federal spending will fall most directly on consumers and retirees by scaling back Social Security, Medicare, Medicaid and social spending programs. The population also will suffer indirectly, by lower federal revenue sharing with U.S. states and cities. The following

Jon Stewart on Warren Buffett and the Class Warfare meme

Jon Stewart has noticed that Fox News is selling viewers on the view that ‘socialists’ like Warren Buffet and Barack Obama are engaged in class warfare. He presents an amusing view; take a look

Who said this: Obama or Hoover?

This is a brief follow-up to my post yesterday proclaiming that this is looking more like Hoover every day. Credit Writedowns reader Greg came across the statement below. Who said it, Herbert Hoover or Barack Obama

Charlie Rose: An Hour with Warren Buffett

On Monday, Warren Buffett wrote a widely-discussed New York Times opinion piece, “Stop Coddling the Super-Rich” about taxes in America. I think his subsequent appearance on the Charlie Rose show was really good at explaining his views and creating a meaningful dialogue on the issues of taxes and inequality. Video below

Policy Conclusions for Russia (Part 2)

Can Russia get the best of both worlds by freeing its economy from technologically unnecessary charges and rentier tolls paid to special interests? Such expenditures prevent the economy from developing. That is the basic cause of poverty – and hence of national decline. Now that neoliberal financial lobbyists have turned Progressive Era economic reforms upside down, it is necessary to “reform the reformers” in order for Russia to rebuild its economy in the way that made the U.S. and Western Europe so successful during their economic takeoffs

Debt Ceiling Deal: All cuts, no taxes

Unfortunately for President Obama, the economy is not doing well. And the cuts envisaged in this deal make that problem worse. From an electoral standpoint this is already becoming a problem in key swing states like Pennsylvania

Chart of the day: tax burden in the US and globally

Despite the widespread view in the US that taxes are high, taxes in the US are relatively low both in the global and historical context. These two charts from the Globe & Mail make that plain

What About Currency Revulsion?

The normal case—let us say, in the US or the UK or Japan—is that anything for sale is for sale in the domestic currency. These sovereign governments never find that they cannot buy something by issuing their own currency. However, the situation can be different in developing nations in which foreign currencies might be preferred for “private” transactions (payments that do not involve the sovereign)

On Voodoo Economics, the Debt Ceiling Debate, and Hyperinflation

If you recall, it was George W. Bush’s father, GWH Bush, who, when campaigning against Reagan, called supply side economics’ claims that tax cuts pay for themselves Voodoo Economics. And Bush was proved right when deficits spiralled out of control and both Reagan and Bush were forced to raise taxes. Yet, the Republicans of today are acting like none of this is true

Taxes Drive Money

The government is then able to issue a currency that is also denominated in the same money of account, so long as it accepts that currency in tax payment. It is not necessary to “back” the currency with precious metal, nor is it necessary to enforce legal tender laws that require acceptance of the national currency. For example, rather than engraving the statement “This note is legal tender for all debts, public and private”, all the sovereign government needs to do is to promise “This note will be accepted in tax payment” in order to ensure general acceptability domestically and even abroad

USA Debt Crisis: Is There Any Truth?

Last week the NY Times covered the division within the economic community over the way out of the USA’s overspending / balance budgeting.

“Reasonable people can sit down and, apart from any political or policy motivations, come up with different answers,” said Robert S. Chirinko, a finance professor at the University of Illinois at Chicago who studies corporate taxation.

No doubt this is true. The economic community’s solutions range from more deficit spending stimulus (on the theory that boosting the economy will boost tax revenues to balance the budget) to out-and-out cutting spending (on the theory that re-balancing, while causing short-term pain, will spur long-term growth). Both extremes have some basis in main stream economic studies

How does fiscal consolidation affect the economy?

The research presented below from the IMF from October 2010 “finds that fiscal consolidation typically reduces output and raises unemployment in the short term. At the same time, interest rate cuts, a fall in the value of the currency, and a rise in net exports usually soften the contractionary impact.”